Kalil v Decotex (Pty) Ltd and Another

• Jurisdiction: South Africa

Kalil v Decotex (Pty) Ltd and Another
1988 (1) SA 943 (A)

1988 (1) SA p943

Citation	1988 (1) SA 943 (A)
Court	Appellate Division
Judge	Corbett JA, Viljoen JA, Smalberger JA, Nestadt JA and Steyn AJA
Heard	November 5, 1987
Judgment	December 3, 1987

Flynote: Sleutelwoorde

G Appeal — Superior Courts — In what cases — Refusal to grant provisional winding-up order — Section 339 of Companies Act 61 of 1973 refers to process of liquidation which commences once order for winding-up granted — Section 150 of Insolvency Act 24 of 1936 thus not H made applicable to orders granting or refusing winding-up of company by virtue of s 339 of Companies Act — All orders made in winding-up applications constituting civil proceedings in terms of s 20 of Supreme Court Act 59 of 1959 — Right to appeal against such orders governed by Supreme Court Act — Order refusing winding-up appealable.

Company — Winding-up — Application by shareholder — Concept of 'tangible interest' — Meaning should not be restricted to prospect of surplus of assets on liquidation — Should bear extended meaning that applicant shareholder be able to show that he will, as member, achieve some advantage or avoid or minimise some disadvantage which would accrue J to him by virtue of membership of company —

1988 (1) SA p944

'Tangible interest' — Should not be made sine qua non of locus standi of applicant shareholder — Should instead be regarded as factor to be taken into account in deciding whether to grant or refuse application — Depending upon circumstances, absence of tangible interest might be decisive factor in exercise of Court's discretion. B — Application for provisional winding-up order — Court not bound to follow practices evolved for sequestration proceedings — Court has inherent power to order its own procedures — Such power includes power to order hearing of viva voce evidence where C no balance of probabilities established in applicant's favour — Standard of proof — Where application opposed, and no balance of probabilities established in applicant's favour, provisional order cannot be granted — But applicant may apply for order referring matter D for hearing of viva voce evidence — Court has discretion to grant such order — In exercise of such discretion, Court should be guided to large extent by prospect of viva voce evidence tipping balance in applicant's favour — If on affidavits, probabilities evenly balanced, Court would be more inclined to allow hearing of viva voce evidence than if balance E were against applicant — Locus standi of applicant as creditor — Rule that where debtor company shows on balance of probabilities that its indebtedness to applicant creditor disputed on bona fide and reasonable grounds, Court should refuse winding-up order, should not be applied F inflexibly.

Headnote: Kopnota

The words 'In the winding-up of a company...' in s 339 of the Companies Act 61 of 1973 refer to the process of liquidation which commences once an order of winding-up has been granted; they do not apply to proceedings giving rise to the liquidation order and, a fortiori, not to proceedings giving rise to the refusal of a liquidation order. The provisions of s 150 of the Insolvency Act 24 of 1936 as G amended, governing and limiting the right to appeal against orders made in sequestration proceedings are not therefore made applicable by virtue of s 339 of the Companies Act to orders granting or refusing the winding-up of a company which is unable to pay its debts. Accordingly, all orders made in winding-up applications, including orders refusing a winding-up, constitute orders in civil proceedings in terms of s 20 of the Supreme Court Act 59 of 1959, and the right to appeal against such H orders is governed by the provisions of the Supreme Court Act.

In casu, where a Provincial Division had refused an application for the provisional liquidation of a company and had given the applicant leave to appeal against its order, the Appellate Division held that the order of the Court a quo, dismissing the application, had been properly appealable in that Court.

The concept of 'tangible interest' in the context of winding-up should I not be restricted to the prospect of a surplus of assets upon liquidation; the concept should bear the extended meaning that a petitioning shareholder should be able to show that he will, as a member of the company, achieve some advantage, or avoid or minimise some disadvantage, which would accrue to him by virtue of his membership of the company.

The element of a tangible interest should not be made a sine qua non of the locus standi of a shareholder who applies for the winding-up of a company, but should rather be regarded as a factor to be taken into J account by the Court when deciding, in the

1988 (1) SA p945

exercise of its discretion, whether or not to grant a winding-up order. Depending on the circumstances, though, the absence of such tangible interest might well prove a decisive factor in the exercise of the Court's discretion.

In the case of applications for a provisional winding-up, the Court is not bound to follow practices evolved in sequestration proceedings, viz that where, in applications for provisional orders, the balance of probabilities is against the applicant or there is no balance either way, no prima facie case is established and the Court should refuse to order viva voce evidence. The Court has an inherent power to order its B own procedures and it does so having regard to the fair and expeditious administration of justice.

Where on the affidavits there is a prima facie case (used in the sense of a 'balance of probabilities') in favour of the applicant, then a provisional order of winding-up should be granted and, save in exceptional circumstances, the Court should not accede to an application C by the respondent that the matter be referred for the hearing of viva voce evidence. Where, on the other hand, the affidavits in an opposed application for a provisional order of winding-up do not reveal a balance of probabilities in favour of the applicant, then clearly no prima facie case is established and a provisional order cannot at that stage be granted. The applicant may, however, apply for an order D referring the matter for the hearing of oral evidence in order to try to establish a balance of probabilities in his favour. In those circumstances, the Court should have a discretion to allow the hearing of oral evidence in an appropriate case. The alternative, viz refusal of the provisional order of winding-up, represents a final decision against the applicant and, if such a decision is always made purely on the affidavits, injustice may be done to the applicant. In exercising such discretion, the Court should be guided to a large extent by the prospects of viva voce evidence tipping the balance in favour of the applicant. Therefore, if on the affidavits the probabilities are evenly balanced, the Court would be more inclined to allow the hearing of oral E evidence than if the balance were against the applicant. The more the scales are weighted against the applicant, the less likely the Court would be to exercise its discretion in his favour.

The rule in regard to locus standi in respect of a creditor in an application for liquidation to the effect that such application should not be resorted to to enforce a claim which is bona fide disputed by the debtor company, with the consequence that where the debtor company shows F on a balance of probabilities that its indebtedness to the applicant creditor is disputed on bona fide and reasonable grounds, the Court will refuse a winding-up order, should not be applied inflexibly.

In casu, where the appellant's application to a Provincial Division for a liquidation order against the first respondent company had been dismissed, and the Court on appeal had found that there was no balance of probabilities favouring either the appellant or the second respondent G (a shareholder who had opposed the application), and that the issue as to whether the appellant had locus standi either as a shareholder or as a creditor to bring the application, as well as the merits of the application, were vitally dependent upon how certain factual disputes were resolved, the Court, in the exercise of its discretion (which it felt the Court a quo should have exercised), referred the matter for the hearing of viva voce evidence on the disputed issues, such issues to include the issue of the appellant's locus standi as a creditor.

The decision in the Witwatersrand Local Division in Kalil v Decotex (Pty) Ltd and Another reversed on appeal.

Case Information

Appeal from the Witwatersrand Local Division (Grosskopf J). The facts appear from the judgment of Corbett JA.

P M Wulfsohn SC (with him B K Pincus) for the appellant: The right to appeal: Under the earlier law, s 159 of the Companies Act 46 of 1926, an I order refusing an application for a winding-up order was appealable. Mahomed v Kazi's Agencies (Pty) Ltd and Others 1949 (1) SA 1162 (N) at 1160 - 1167; Service Trade Supplies (Pty) Ltd v Dasco & Sons (Pty) Ltd 1962 (3) SA 424 (T) at 425C - 427A. Under s 21(1) of the Supreme Court Act 59 of 1959 an appeal lies 'from any decision of the Court of a Provincial or Local Division'. Law Society, Transvaal v Behrman 1981 (4) SA 538 (A) J at

1988 (1) SA p946

A 545G - 548C, especially 546D - F. The dismissal of the application for winding-up was a 'decision' of the Local Division, being the Court a quo, and it should be appealable. Cf the Law Society case supra at 548A - B; Lawclaims (Pty) Ltd v Rea Shipping Co of SA: Schiffcommerz Aussenhandelsbetrieb Der VVB Schiffbau Intervening 1979 (4) SA 745 (N) at 750E; Du Plooy and Another v Onus (Edms) Bpk and Two Others 1981 (1) B PH E2 (O) (obiter dictum); Henochsberg The Companies Act 4th ed at 565. So the...